Lyra McKee, 29, was a well known investigative journalist and had recently moved from Belfast to Derry to live.
The incident occurred in the Creggan estate.
P.S.N.I. Assistant Chief Constable Mark Hamilton said: “Sadly I can confirm that following shots being fired tonight in Creggan, a 29 year old woman has been killed.
"We are treating this as a terrorist incident and we have launched a murder enquiry.”
Sinn Fein Deputy Leader and M.L.A., Michelle O'Neill described the killing as a "senseless loss of life".
“I am shocked and saddened at the tragic news that a young woman has been shot dead by so-called dissidents in the Creggan estate tonight.
“My first thoughts and that of my party are with the family of the woman killed. This is a senseless loss of life.
“The murder of this young woman is a human tragedy for her family, but it is also an attack on all the people of this community, an attack on our peace process and an attack on the Good Friday Agreement."
Mrs. O'Neill said the person or persons responsible for the killing "care nothing for the people of Derry".
“I unreservedly condemn those responsible for killing this young woman.
“We will remain resolute in our opposition to the pointless actions of these people who care nothing for the people of Derry.
“We remain united in our determination to building a better and peaceful future for all.
“Those responsible should listen to the people, they should disband immediately and end their pointless actions against the community which tonight has tragically claimed the life of a young woman.
“I have spoken with the P.S.N.I. Chief Constable George Hamilton tonight.
“I am appealing for calm and I urge anyone with any information about this killing to bring it forward immediately to the police and assist their inquiries," said Mrs. O'Neill.